The stock market is one of the cornerstones of the economy. It has endured as a means to spur economic gains for both companies and individual investors for over 200 years.
Of course, we know from recent history that the stock market has endured its share of bad times, most recently in March 2020 at the outset of the COVID-19 pandemic. Such quick downward spirals serve as warnings to be more mindful of taking on economic risks. Many would-be investors have slowed down their ambitions, preferring to wait until conditions are more stable.
The inverse is also true. Some investors wait too long for perfect market conditions, delaying until a company has already proven to be a winner before buying shares. In many cases, doing so minimizes their chances of turning a sizable profit.
The simple truth about the stock market is that it always incorporates some element of risk, no matter what shares you buy or how strong the economic indicators may be. But are there times when it’s more advantageous to start investing? Should I buy stocks now?
Should I Invest in the Stock Market Now?
When is a “Good” Time to Buy Stock?
The objective in buying stock is to eventually earn some form of profit from your investment. The key to success in the stock market, therefore, is acquiring shares at sales points that set you up for a decent return on investment.
You’ve probably heard the phrase “buy low, sell high” in the context of deciding when to execute a transaction, and it’s as good a guideline as any. When you buy stock shares when they’re priced cheaply, they stand a higher chance of returning some profits. Even with standard price fluctuations, which every investment experiences, you’re still more likely to recoup some profit if you hold onto your shares long enough.
When is a “Bad” Time to Buy Stock?
By and large, there’s usually not a point when it’s a flat-out terrible decision to start investing in securities. Of course, that depends on the commodities you select to invest in, as well as your overall investment strategy.
But there are usually a few positions or companies that are, relatively speaking, recession-proof, which can seem like an inviting prospect even in periods of downturn.
That said, some market environments are far better to enter into than others. In the middle of the COVID-19 pandemic, some investment experts warned against jumping on certain individual stocks, citing market instability and lack of clarity about many companies’ post-pandemic prospects.
Most of the riskiest securities were smaller cap, startup companies. But it may have been an acceptable time to invest in larger, blue-chip companies whose share prices had temporarily dropped and were likely to survive and thrive after the pandemic’s miniature recession.
What to Understand About Market Conditions
The stock market is a complex concept, complicated enough to deter many potential investors from getting involved until they believe the conditions are perfect enough for them to take the risk. Of course, there’s never any perfect time to take your first steps into securities investment, just like there’s never really any time that you should fully avoid the market.
A few things can help you to make clearer decisions about the right time to start investing:
Long-Term Assessments
When investment experts recommend buying shares of a certain company’s stocks, they believe there’s at least a good chance that these stocks are positioned for long-term success. That kind of speculation drives the overall health of the stock market; get-rich-quick prospects do not. For that reason, the stock market is less of a gamble than a lot of other investment opportunities.
The Stock Market Has Never Stopped Growing (For Long)
There have, of course, been a few periods of economic recession and depression that have affected the stock market. But the New York Stock Exchange has experienced steady, overall growth since its founding in 1817. In recent years, we’ve seen the stock market’s impressive resilience in rebounding after market disruptions and downturns. It’s a plank of the economy with a 200-year history of growth.
Stock Market Health is Different Than Overall Economic Health
Factors like unemployment, consumer confidence, and other external conditions certainly play a part in the stock market. But the correlation between the economy and the stock market isn’t as close as it was about 100 years ago. There’s more diversity in the marketplace, so even if a certain business sector is experiencing a bad stretch, others may be holding their own.
Investors Seek Security in Volatile Markets
When the stock market is experiencing ups and downs, there are still certain commodities that represent a safe bet. They don’t react too sharply to a sudden disaster, and if they do, they’re likely to weather the storm. Wise investors have a few fallback options, even in turbulent times, that they can execute to stay solvent.
Should I Invest in the Stock Market Now?
What About “Timing the Market”?
The stock market has a funny relationship with time. This makes it incredibly difficult to predict the direction given security might take. But that doesn’t stop certain investors who are more attuned to taking risks from making speculative investments and predictions — both right and wrong.
Waiting for all the stars to align before investing may be prudent, but it can also result in missed opportunities. The March 2020, COVID-related stock market boom is a great example. A lot of investors sold their holdings and didn’t buy back in as the market recovered, believing that it would only crash again soon. As it turned out, that initial crash turned out to be the worst, and the market regained its strength even as the pandemic raged on. Those who tried to time the market likely would have been better off holding onto their investments after the initial shock of the crash.
Conversely, some investors try to time their investment strategies according to their expectations that a certain stock will profit the most. This, of course, is a big reason that the stock market exists: To make money from those occasional “boom” times when a company’s products and services will be in demand.
For example, you may believe now is a great time to invest in companies that stand to gain from the introduction of 5G technologies. And you’re right — if the company you choose is the right one. Many will not be, no matter how futuristic they seem.
It all goes to prove that the stock market, with all its durability, is very tricky to predict. Those who try to “time” the market run the risk of missing some opportunities — or holding on too long to others — that can adversely impact their portfolio’s overall health. Most investment experts suggest that small-scale investors do not try to time the market at all.
Instead, it’s better to be practical, deliberate, and measured about your investment strategy. That doesn’t mean being inflexible — the market will always change and so should your overall approach — but it does mean being patient.
More important than jumping in at the right time is staying with your investment strategy for long enough. As Charlie Munger of Berkshire Hathaway advises: “The big money is not in the buying and selling, but in the waiting.”
Suggestions for Investing Today
Is now a good time to buy stocks? The answer is “yes.” The answer will always be “yes,” no matter when you’re reading this. But it’s never a good time to buy stocks without caution or planning.
Is now a good time to invest? No matter when you jump into the world of investing, take these approaches and strategies to heart:
Invest in Businesses, Not Stocks
Changing your mindset from “stock investor” to “business investor” can benefit you greatly. Seek out companies whose business models you understand and believe in, rather than ones who might reap rewards more quickly.
Research Everything
Get familiar with the fundamentals and how to do a technical analysis of every company you’re considering. Determine how well they’ve come through previous stock market dips and turns.
Keep Your Portfolio Diverse
Having a solid portfolio covering many different companies and business sectors is a great way to protect your holdings from downturns in certain economic segments. Blending dependable blue-chip stocks with a limited number of speculative buys makes it easier to take some risks.
Keep a Long-Term Focus
View your portfolio as a never-ending story, rather than a series of get-rich-quick episodes. The long view will help you to be more realistic and assured about the decisions you make along the way.
Is Now a Good Time to Invest? Gorilla Trades Can Help You Decide!
Gorilla Trades entered the stock market in 1999 — just as the market was about to enter the stormy dot-com bust. We helped our clients weather that major economic storm and have helped them thrive with data-driven, reality-based suggestions ever since. You might be wondering, “Is now a good time to buy stocks?” We can help you decide! Sign up for our free trial to get started on your investing adventure.